Semerdjian v. McDougal Littell, et al.

On issue of disgorgement of profits in a copyright infringement action, court holds that plaintiff is not required to show that inclusion of the copyrighted work in textbooks published by defendant prompted purchases of the books

Plaintiff is the heir of a painter who licensed three of his paintings to defendant McDougal Littell for use in 40,000 copies of a 9th grade textbook. Plaintiff sued McDougal Littell and R.R. Donnelley & Sons, the company that printed the textbooks, for copyright infringement, alleging that defendants printed and sold over 1.3 million copies of the textbook.

Defendants moved for summary judgment on the issue of disgorgement of defendants’ profits. Under § 504(b) of the Copyright Act an aggrieved plaintiff is entitled to “any profits of the infringer that are attributable to the infringement and are not taken into account in computing the actual damages. In establishing the infringer's profits, the copyright owner is required to present proof only of the infringer's gross revenue, and the infringer is required to prove his or her deductible expenses and the elements of profit attributable to factors other than the copyrighted work.” 17 U.S.C. § 504(b).

The court denied summary judgment for McDougal Littell and granted summary judgment for R.R. Donnelley & Sons on the issue of disgorgement of profits. Before the court was the issue as to whether plaintiff succeeded in showing that defendants’ revenues were reasonably related to the infringement and that there was a causal connection between defendants’ revenues and the infringement. Plaintiff provided evidence that McDougal earned about $64 million from the sale of the student and teacher editions of the textbook, which contained the paintings, as well as ancillary materials that do not contain the paintings.

The court rejected defendants’ argument that plaintiff must show that inclusion of the paintings in the textbooks prompted purchases of the books. The court held that this case involves direct profits (not indirect profits) and, accordingly, the inquiry into the decision to buy is not required. “A copyrighted work need not directly affect demand for a product to affect revenues and profits.” The court concluded that there is a genuine issue of material fact as to whether the inclusion of the paintings affected revenues, and denied summary judgment for McDougal Littell.

Regarding Donnelley (the printer of the book), the court said the decision to buy is dispositive and Donnelley provided uncontroverted evidence that the paintings did not motivate purchases of the textbook by the publisher, and that Donnelley’s revenues from printing the textbooks were determined entirely based on the number of books McDougal Littell requested.